By David Akinmola
The Centre for the Promotion of Private Enterprise (CPPE) has raised concerns over what it described as weak credit allocation to the real sector, warning that Nigeria’s ongoing bank recapitalisation may not translate into economic growth without a deliberate shift in lending priorities.
The think tank noted that while the recapitalisation drive by the Central Bank of Nigeria (CBN) is expected to strengthen banks’ balance sheets and improve resilience, there is little evidence that increased capital will automatically boost access to credit for productive sectors of the economy.
Chief Executive Officer of CPPE, Muda Yusuf, said the fundamental challenge lies not in the size of bank capital, but in the structure and direction of lending.
“Recapitalisation will improve the capacity of banks, but capacity does not necessarily translate to willingness to lend to the real sector. There are risk considerations, structural bottlenecks, and policy uncertainties that continue to constrain credit flow,” he said.
According to CPPE, a significant portion of bank lending remains concentrated in low-risk segments such as government securities, oil and gas trading, and large corporates, leaving small and medium-sized enterprises (SMEs), agriculture, and manufacturing sectors underfunded.
The group warned that this pattern undermines the broader objective of recapitalisation, which is to support economic expansion, job creation, and industrial development.
Analysts said high interest rates, weak infrastructure, and macroeconomic instability have made lending to the real sector less attractive to banks, prompting a preference for safer and more liquid assets.
They added that without targeted incentives and risk-sharing mechanisms, banks may continue to avoid sectors perceived as high-risk despite increased capital buffers.
The CPPE also highlighted the impact of inflationary pressures and exchange rate volatility on credit conditions, noting that these factors have raised the cost of borrowing and reduced demand for loans among businesses.
“Even when credit is available, affordability becomes a major issue. Many businesses cannot sustain borrowing at current interest rates,” Yusuf added.
Industry stakeholders are therefore calling for complementary reforms to ensure that recapitalisation delivers its intended impact. These include strengthening credit guarantee schemes, improving the business environment, and enhancing regulatory frameworks to support lending to priority sectors.
A banking sector analyst noted that aligning recapitalisation with credit expansion requires a holistic approach.
“Capital is important, but it must be matched with policies that de-risk lending to critical sectors. Otherwise, banks will continue to channel funds to safer assets rather than productive investments,” the analyst said.
The CPPE further urged policymakers to monitor lending patterns closely and introduce measures that encourage banks to increase exposure to sectors that drive economic growth.
It stressed that without improved credit allocation, the benefits of recapitalisation may remain limited, with minimal impact on output, employment, and overall economic development.
As Nigeria pursues financial sector reforms, the think tank maintained that ensuring effective transmission of bank capital into real sector financing will be crucial to achieving inclusive and sustainable growth.
